SP500/Total Stock Market

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indexonlyplease
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SP500/Total Stock Market

Post by indexonlyplease » Mon Aug 14, 2017 2:15 pm

I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?

Dottie57
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Re: SP500/Total Stock Market

Post by Dottie57 » Mon Aug 14, 2017 2:25 pm

Stay the course would mean the portfolio stays the same. My employer changed the company managing 401k at least 3 times in this century. Each time I needed to adjust. But no huge changes in asset allocation untile recently since I will retire with 5 years

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njboater74
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Re: SP500/Total Stock Market

Post by njboater74 » Mon Aug 14, 2017 2:31 pm

Total Stock Market is approximately 83% S&P 500, 17% everything else. The returns of the S&P 500 should be fairly close to TSM.

Did you read about low expected returns for the next 10 years? Or low returns for the past 10 years?
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

asif408
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Re: SP500/Total Stock Market

Post by asif408 » Mon Aug 14, 2017 2:36 pm

Over the last 10 years, TSM earned you about $300 more on a $10,000 investment than the S&P: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

Not exactly life changing differences.

dcabler
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Re: SP500/Total Stock Market

Post by dcabler » Mon Aug 14, 2017 2:41 pm

You can get a pretty good idea on the difference in size/style between TSM and SP500 by going to Morningstar, choosing funds that represent either of these indices and clicking on Portfolio. You'll see, for example, that SP500 has no small caps in it whereas TSM has less large cap than SP500, slightly more midcap and some small caps.

Valuethinker
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Re: SP500/Total Stock Market

Post by Valuethinker » Mon Aug 14, 2017 2:44 pm

indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
I am not sure what you are referring to?

S&P500 has nearly tripled since bottom in 2009. Of course, since late 2007 it doesn't look so great, taking into account dividends though you should have a pretty healthy return.

In the long run, VG Total Stock Market and the S&P 500 have tended to track each other. 17% in other than large cap companies is not enough to really swing the performance. There are reasons to prefer TSM if you have a choice, but if you do not, well I would not sweat it too much.

FactualFran
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Re: SP500/Total Stock Market

Post by FactualFran » Mon Aug 14, 2017 2:46 pm

For any 10-year period, the difference in the returns of the Vanguard 500 Index Fund and Vanguard Total Stock Market Index Fund will likely be small.

Over the ten years 1999 through 2008, the annualized total return of the Vanguard 500 Index Fund was -1.46%, while the corresponding return of the Vanguard Total Stock Market Index Fund was -0.66%.

I don't have a three fund portfolio. However, using the returns that I have of the Wilshire 5000, EAFE (net), and Aggregate Bond indexes, an annually rebalanced equal split among all three funds had a corresponding return of 2.76%.

dcabler
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Re: SP500/Total Stock Market

Post by dcabler » Mon Aug 14, 2017 2:49 pm

Are you talking about this? There was a period from 1998-ish to 2008-ish where the SP500 (with dividends reinvested) returned 0% over that period. In fact, there are multiple 10 year periods on the chart in the link below where that happened. It can happen with any index or cap weighting - nothing's guaranteed.

http://www.indexologyblog.com/wp-conten ... /500TR.jpg

indexonlyplease
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Re: SP500/Total Stock Market

Post by indexonlyplease » Mon Aug 14, 2017 2:51 pm

Valuethinker wrote:
Mon Aug 14, 2017 2:44 pm
indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
I am not sure what you are referring to?

S&P500 has nearly tripled since bottom in 2009. Of course, since late 2007 it doesn't look so great, taking into account dividends though you should have a pretty healthy return.

In the long run, VG Total Stock Market and the S&P 500 have tended to track each other. 17% in other than large cap companies is not enough to really swing the performance. There are reasons to prefer TSM if you have a choice, but if you do not, well I would not sweat it too much.

Over the ten years 1999 through 2008, the annualized total return of the Vanguard 500 Index Fund was -1.46%, while the corresponding return of the Vanguard Total Stock Market Index Fund was -0.66%.

Above is what I am talking about. FactualFran posted. So question does this mean I had 10 years of bad returns?

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njboater74
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Re: SP500/Total Stock Market

Post by njboater74 » Mon Aug 14, 2017 2:53 pm

That's a very cherry picked period. There were two severe bear markets in the time frame, and no recovery from the second one.

Look at the returns from 2009-present. Tells a very different story. Think longer term.
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

indexonlyplease
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Re: SP500/Total Stock Market

Post by indexonlyplease » Mon Aug 14, 2017 2:53 pm

indexonlyplease wrote:
Mon Aug 14, 2017 2:51 pm
Valuethinker wrote:
Mon Aug 14, 2017 2:44 pm
indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
I am not sure what you are referring to?

S&P500 has nearly tripled since bottom in 2009. Of course, since late 2007 it doesn't look so great, taking into account dividends though you should have a pretty healthy return.

In the long run, VG Total Stock Market and the S&P 500 have tended to track each other. 17% in other than large cap companies is not enough to really swing the performance. There are reasons to prefer TSM if you have a choice, but if you do not, well I would not sweat it too much.

Over the ten years 1999 through 2008, the annualized total return of the Vanguard 500 Index Fund was -1.46%, while the corresponding return of the Vanguard Total Stock Market Index Fund was -0.66%.

Above is what I am talking about. FactualFran posted. So question does this mean I had 10 years of bad returns?

Now to my backtesting

indexlover
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Re: SP500/Total Stock Market

Post by indexlover » Mon Aug 14, 2017 2:55 pm

indexonlyplease wrote:
Mon Aug 14, 2017 2:51 pm
Valuethinker wrote:
Mon Aug 14, 2017 2:44 pm
indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
I am not sure what you are referring to?

S&P500 has nearly tripled since bottom in 2009. Of course, since late 2007 it doesn't look so great, taking into account dividends though you should have a pretty healthy return.

In the long run, VG Total Stock Market and the S&P 500 have tended to track each other. 17% in other than large cap companies is not enough to really swing the performance. There are reasons to prefer TSM if you have a choice, but if you do not, well I would not sweat it too much.

Over the ten years 1999 through 2008, the annualized total return of the Vanguard 500 Index Fund was -1.46%, while the corresponding return of the Vanguard Total Stock Market Index Fund was -0.66%.

Above is what I am talking about. FactualFran posted. So question does this mean I had 10 years of bad returns?
Yes, it was 10 years of bad returns. And it could happen again. Hence the need for diversification in asset classes.

MathWizard
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Re: SP500/Total Stock Market

Post by MathWizard » Mon Aug 14, 2017 3:00 pm

Picking the top of a bubble to the bottom of a recession will give you a bad representation of
overall success.

If you had pulled money out before the crashes and put money back in right after the bottom,
you'd either be a rich genius or you'd be behind bars for insider trading.

I would ignore this bit of data.

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FIREchief
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Re: SP500/Total Stock Market

Post by FIREchief » Mon Aug 14, 2017 3:26 pm

Valuethinker wrote:
Mon Aug 14, 2017 2:44 pm
S&P500 has nearly tripled since bottom in 2009. Of course, since late 2007 it doesn't look so great, taking into account dividends though you should
S&P 500 total return from late 2007 until now (i.e. 10 year return) has been close to 8% (as measured by FUSVX total return). I wouldn't say that "doesn't look so great." More like "doesn't look AS great." 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

indexonlyplease
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Re: SP500/Total Stock Market

Post by indexonlyplease » Mon Aug 14, 2017 4:07 pm

So there was 10 years of bad years. Does this mean someone should own more stock funds like REITs, mid or small value etc??

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arcticpineapplecorp.
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Re: SP500/Total Stock Market

Post by arcticpineapplecorp. » Mon Aug 14, 2017 4:15 pm

indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
I think you're thinking of the most recent "lost decade". I believe that's what it was called. Japan had more than one (in a row). The U.S.'s lost decade was from 2000-2009. You can see how the S&P500 index did from 1/1/00-12/31/09. If you invested $10,000 on 1/1/00 by 12/31/09 you would have only had $9082.36. Yes, ended with $917.64 less than you started with. And this is a growth chart which means dividends were reinvested. Even with dividends received (and reinvested) your portfolio would have still been worth less than what you started with.

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

That being said...

Kinda meaningless don't you think? For starters, who invests only once and never again over the rest of your life? Don't you invest whenever you get paid? So you're not going to invest once and never again. Secondly, are you only planning on investing for 10 years? Most people start investing in their 20s, 30s or 40s...and then retire in their 60s (or later, some earlier). Those that retire at a normal retirement age could live another 20-30 years. So what does a 10 year return really mean when you think about your investing and retirement life which includes decades, not a decade.

Finally, many look at 10 year returns by decade. But why? Does the market have any knowledge of decades? No. A decade equals 10 years, but a 10 year period does not have to equal a decade. You might have a bad decade, but does that mean you have a bad 10 years that are within a proximate distance? As an example, you see the lost decade chart above (2000-2009) but look at another 10 year period (not a decade though) around the same time...from 2003-2012. How would you have done with a $10,000 investment in the S&P500 index from the 10 year period from 1/1/03-12/31/12? Ended with $19,832.41, almost double the amount you started with (a 98.32% return over that 10 year period).

Thoughts?

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

rgs92
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Re: SP500/Total Stock Market

Post by rgs92 » Mon Aug 14, 2017 4:34 pm

The only solution is to keep a healthy portion in fixed income at all times (bonds and maybe some cash/money markets).

livesoft
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Re: SP500/Total Stock Market

Post by livesoft » Mon Aug 14, 2017 4:39 pm

Ah, "The Lost Decade" google it.
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hightower
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Re: SP500/Total Stock Market

Post by hightower » Mon Aug 14, 2017 4:41 pm

arcticpineapplecorp. wrote:
Mon Aug 14, 2017 4:15 pm
indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
I think you're thinking of the most recent "lost decade". I believe that's what it was called. Japan had more than one (in a row). The U.S.'s lost decade was from 2000-2009. You can see how the S&P500 index did from 1/1/00-12/31/09. If you invested $10,000 on 1/1/00 by 12/31/09 you would have only had $9082.36. Yes, ended with $917.64 less than you started with. And this is a growth chart which means dividends were reinvested. Even with dividends received (and reinvested) your portfolio would have still been worth less than what you started with.

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

That being said...

Kinda meaningless don't you think? For starters, who invests only once and never again over the rest of your life? Don't you invest whenever you get paid? So you're not going to invest once and never again. Secondly, are you only planning on investing for 10 years? Most people start investing in their 20s, 30s or 40s...and then retire in their 60s (or later, some earlier). Those that retire at a normal retirement age could live another 20-30 years. So what does a 10 year return really mean when you think about your investing and retirement life which includes decades, not a decade.

Finally, many look at 10 year returns by decade. But why? Does the market have any knowledge of decades? No. A decade equals 10 years, but a 10 year period does not have to equal a decade. You might have a bad decade, but does that mean you have a bad 10 years that are within a proximate distance? As an example, you see the lost decade chart above (2000-2009) but look at another 10 year period (not a decade though) around the same time...from 2003-2012. How would you have done with a $10,000 investment in the S&P500 index from the 10 year period from 1/1/03-12/31/12? Ended with $19,832.41, almost double the amount you started with (a 98.32% return over that 10 year period).

Thoughts?

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Great post.

indexonlyplease
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Re: SP500/Total Stock Market

Post by indexonlyplease » Mon Aug 14, 2017 5:52 pm

arcticpineapplecorp. wrote:
Mon Aug 14, 2017 4:15 pm
indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
I think you're thinking of the most recent "lost decade". I believe that's what it was called. Japan had more than one (in a row). The U.S.'s lost decade was from 2000-2009. You can see how the S&P500 index did from 1/1/00-12/31/09. If you invested $10,000 on 1/1/00 by 12/31/09 you would have only had $9082.36. Yes, ended with $917.64 less than you started with. And this is a growth chart which means dividends were reinvested. Even with dividends received (and reinvested) your portfolio would have still been worth less than what you started with.

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

That being said...

Kinda meaningless don't you think? For starters, who invests only once and never again over the rest of your life? Don't you invest whenever you get paid? So you're not going to invest once and never again. Secondly, are you only planning on investing for 10 years? Most people start investing in their 20s, 30s or 40s...and then retire in their 60s (or later, some earlier). Those that retire at a normal retirement age could live another 20-30 years. So what does a 10 year return really mean when you think about your investing and retirement life which includes decades, not a decade.

Finally, many look at 10 year returns by decade. But why? Does the market have any knowledge of decades? No. A decade equals 10 years, but a 10 year period does not have to equal a decade. You might have a bad decade, but does that mean you have a bad 10 years that are within a proximate distance? As an example, you see the lost decade chart above (2000-2009) but look at another 10 year period (not a decade though) around the same time...from 2003-2012. How would you have done with a $10,000 investment in the S&P500 index from the 10 year period from 1/1/03-12/31/12? Ended with $19,832.41, almost double the amount you started with (a 98.32% return over that 10 year period).

Thoughts?

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Great response. I am just looking at how the returns are but you are correct, I have investing before the dates and after and still do. Just wondering why so many state to invest in other asset classes. I am not sure if it will help because I have not understood yet the percentage that would matter of the other assets.

Thanks,

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ruralavalon
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Re: SP500/Total Stock Market

Post by ruralavalon » Mon Aug 14, 2017 6:13 pm

indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
Which 10 year period were they referring to? That would make a difference. They were probably ignoring dividends.

Over the last ten years, with dividends reinvested, you would have approximately doubled your money using either a S&P 500 index fund or a total stock market index fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

indexonlyplease
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Re: SP500/Total Stock Market

Post by indexonlyplease » Mon Aug 14, 2017 6:17 pm

ruralavalon wrote:
Mon Aug 14, 2017 6:13 pm
indexonlyplease wrote:
Mon Aug 14, 2017 2:15 pm
I read somewhere that the SP500 had low returns for a 10 year period. Not sure of the years or return. I know they have a name for it.

Quesiton: owning the total stock market fund during this period, what kid of returns would an investor see? Wound this just be bad years?

And what would be your 3 fund portfolio have been?
Which 10 year period were they referring to? That would make a difference. They were probably ignoring dividends.

Over the last ten years, with dividends reinvested, you would have approximately doubled your money using either a S&P 500 index fund or a total stock market index fund.
I think you're thinking of the most recent "lost decade 2000-2009. That was the response from above post.

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JoMoney
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Re: SP500/Total Stock Market

Post by JoMoney » Mon Aug 14, 2017 9:05 pm

For a longer data series on Monringstar, here's some links:

Ibbotson Associates US Large Stocks (S&P 500) since 1925

Ibbotson Associates US Large Stocks (S&P 500) INFLATION ADJUSTED since 1925

Wilshire 5000 (Total Stock Market) & S&P 500 Total Return since 1970

S&P 500 (1936) Series (There are a couple S&P 500 Total Return data series because S&P changed the time frame dividends were accounted for/reinvested)

DFA 2017 Matrix book which has lots of annualized CAGR rates in a chart
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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arcticpineapplecorp.
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Re: SP500/Total Stock Market

Post by arcticpineapplecorp. » Mon Aug 14, 2017 9:19 pm

indexonlyplease wrote:
Mon Aug 14, 2017 5:52 pm
Great response. I am just looking at how the returns are but you are correct, I have investing before the dates and after and still do. Just wondering why so many state to invest in other asset classes. I am not sure if it will help because I have not understood yet the percentage that would matter of the other assets.

Thanks,
Depends on the asset classes you're referring to. If you added in bonds, returns would have likely been positive over both of the previous time periods stated (2000-2009 and 2003-2012) because interest rates fell which means the value of your bond fund would have risen (you would have made money). So that's one reason for diversifying with other asset classes (just because stocks have a bad run doesn't mean bonds do). See below? Of 10 year periods, there were 64 our of 75 such periods (85% of the time) when stocks outperformed from 1928-2011. So bonds outperformed stocks 15% of the all 10 year periods between 1928-2011. That's why you might want to hold other assets. You never know.

Image
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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